Decision Support Systems

and
Business Intelligence
Business:
A person’s regular occupation,

profession or trade.

An activity that someone is

engaged in.

An activity conducted with an

objective of earning profits.

Features of Business:
1. Exchange of goods and services
2. Deals in numerous transactions
3. Profit is the main objective
4. Business skills for economic success

5. Risks and uncertainty

6. Buyers and sellers

7. Marketing and distribution of goods

8. To satisfy human wants

9. Social obligations(Responsibility's)
Functional Business Areas
Intelligence:
Intelligence refers to intellectual

functioning.
A capacity for learning,
reasoning, understanding, and
similar forms of mental activity;
ability in grasping truths,
relationships, facts, meanings,
etc.
Business Intelligence:
Set of theories, methodologies,

technologies that transform raw

data into meaningful and useful
information for business
purpose.
Provides historical, current and

predictive views of business

operations.
 Need for Computerized Support in Business:

Business Pressure – Response – Support Model

Three Components:

1. Business Pressures

2. Responses

3. Computerized Support
 Pressures
BUSINESS ORGANIZATI DECISION
ENVIRONMENT ONAL AND
AL FACTORS RESPONSES SUPPORT
Opportuni
ties

BUSINESS PRESSURE RESPONSE SUPPORT MODEL

Business Pressures:

 Results from today's business

environment.

Environment is becoming more

and more complex.

Complexity creates opportunities as

well as problems.

E.g. Globalization
 Factors that give Rise to Business Pressures
Markets Customers Technology Societal

• Strong • Desire for • More innovations • Growing Govt.

competition customization •New products and Regulations
• Expanding global •Desire for quality services • Workforce is
markets •Diversity of • Increasing more diversified
•Booming products information overload • Increasing Social
Electronic Markets • Speed of • Social n/w, web 2.0 Responsibility of
on the Internet delivery companies
• Innovative Mktg. • Customers • Greater emphasis
Methods getting powerful on sustainability
• Need for real time, and less loyal.
on demand
transactions
Responses:
 Actions taken by company to counter the pressure/to take
advantage of opportunities available.
 Responses can be:
Reactive

Anticipative
Adaptive

Proactive
Managers may take actions as:
1. Employ strategic planning.
2. Use new and innovative business models.
3. Restructure business processes.
4. Participate in business alliances(association,grouping)
5. Improve corporate information systems.
6. Improve partnership relationships.
7. Encourage innovation and creativity.
8. Improve customer services and relationships.
9. Move to electronic commerce.
10. Move to make to order production.
11. Use new IT to improve communication, data access and
collaboration.
12. Respond quickly to competitors actions.

13. Automate tasks

14. Improve decision making using Analytics.

Many of these actions require computerized support.

Managerial Decision Making:
Management:
Management is a process by which organizational goals are

achieved by using resources.

Inputs: resources
Output: attainment of goals
Measure of success: outputs / inputs

MANAGEMENT
INPUT Planning OUTPUT
Organizing Attainment of
RESOURCES Directing Goals
Controlling
Levels of Management
Nature of Managers Work:

Mintzberg's (2008) Role of Managers:

Three major categories:

1. Interpersonal

2. Informational

3. Decisional
 Interpersonal:

 Figurehead – Is symbolic head, obliged to perform a no. of routine duties of a

legal or social nature

 Leader – Is responsible for the motivation and activation of subordinates,

responsible for staffing ,training and associated duties.

 Liaison(link)- Maintains self developed network of outside contacts and

informers who provide favors and information

 Informational:

 Monitor – seeks & receive information about organization

 Disseminator – transmit information received from outsiders , subordinates to

member of the organization

 Spokesperson – transmits information to outsiders about the organization’s plans,

policies , action , results

Decisional:
 Entrepreneur – searches the organization and its environment for

opportunities
 Disturbance Handler- is responsible for corrective action when the

organization faces important ,unexpected disturbance

 Resource Allocator – Is responsible for the allocation of

organizational resources of all kinds

 Is responsible for the making or approval of all significant

organizational decisions .
 Negotiator – Is responsible for representing the organization at major

negotiation.
Decision Making process:

In the early days, decision making was purely an art.

Decisions were based on creativity, judgment, intuition,

experience and Trial and Error Method .

Lack of Systematic quantitative methods using scientific

approach.
Decision Making
Process
This process is difficult for the following reasons:

1. Environments are growing more complex and decision making

is complex task.
2. Technology , IS, search engines and globalization results in
more and more alternatives from which to choose.
3. Government regulations and need for compliance,
competition, changing consumer demands etc produce more
uncertainty and making it difficult to predict consequences
and future.

4. Need to make rapid decisions, frequent and unpredictable

changes makes trial and error learning difficult.
Simon’s Decision Making Process
Computerized support for Decision Making:

Traditional Computerized System e.g. Payroll system.

Modern computerized systems e.g. CAD, AI Systems,

DW,DM, OLAP, Dashboards.

Benefits of using Computerized System:
1. Speedy Computations.
2. Improved communication and collaboration.

3. Increased productivity of group members.

4. Improved data management.

5. Managing giant DW.

6. Quality support.

7. Agility support.

8. Overcoming cognitive limits in processing and storing information.

9. Everywhere computing.
Computerized Decision Support Framework
Degree of Structuredness (Simon, 1977)
Decision are classified as

 Highly structured (i.e., programmed)

 Semi-structured

 Highly unstructured (i.e., non-programmed)

Types of Control (Anthony, 1965)

 Strategic planning (top-level, long-range)

 Management control (tactical planning)

 Operational control
Computer Support for Structured Decisions:
Structured problems are encountered repeatedly.

They have a high level of structure.

It is possible to abstract, analyze, and classify them into specific

categories.
E.g., make-or-buy decisions, capital budgeting, resource

allocation, distribution, procurement, and inventory control .

For each category a solution approach is developed generally

quantitative formulas.
E.g. Management Science
Management Science Approach:
Also referred to as Operation Research.

In solving problems, managers should follow the five-step MS approach.

1. Define the problem.

2. Classify the problem into a standard category .

3. Construct a model that describes the real-world problem.

4. Identify possible solutions to the modeled problem and evaluate the

solutions.

5. Compare, choose, and recommend a potential solution to the

problem.
Automated Decision Making :
A relatively new approach to supporting decision making.

Applies to highly structured decisions.

An ADS is a rule-based system that provides a solution to a

repetitive managerial problem in a specific area

e.g., simple-loan approval system
Computer Support for Unstructured Decisions:
 Unstructured problems can be only partially supported by
standard computerized quantitative methods.
They often require customized solutions.

They benefit from data and information.

Intuition and judgment may play a role.

Computerized communication and collaboration technologies

along with knowledge management is often used.

Computer Support for Semi-structured Problems:
Solving semi-structured problems may involve a combination of

standard solution procedures and human judgment .

MS handles the structured parts while DSS can improve the

quality of information on which the decision is based with the

unstructured parts.
With proper data and information, a range of alternative

solutions, along with their potential impacts can be understood.

Concept of Decision Support Systems:

Classical Definitions of DSS

Interactive computer-based systems, which help decision makers

utilize data and models to solve unstructured problems "

- Gorry and Scott-Morton, 1971

Decision support systems couple the intellectual resources of

individuals with the capabilities of the computer to improve the

quality of decisions.
It is a computer-based support system for management decision

makers who deal with semistructured problems .

- Keen and Scott-Morton, 1978

DSS as an Umbrella Term:
The term DSS can be used as an umbrella term to describe any

computerized system that supports decision making in an

organization.
 E.g., an organization wide knowledge management system;

 a decision support system specific to an organizational function

(marketing, finance, accounting, manufacturing, planning, SCM, etc.)

High-Level Architecture of a DSS
Types of DSS:
Two major types:
 Model-oriented DSS

 Data-oriented DSS
Data Decision Challenge:
 In reality there is a large gap between the data existing in the

various files and databases and the use of that data by business
people.
 The difficulties experienced by the business world are:

 Relevant data is difficult to locate.

 The data available is not formatted correctly.

 Only the raw data is available rather than its history and summaries.

 Data is often incorrect or inconsistent.

 It is not easy to correlate data from different processes.

 All these realities can negatively impact the business.

More data and data sources…
Current Status
What do I
do???
How do I increase
sales????

How do I make my
product better???

Business Users

Mountains of Data
Evolution of DSS into Business Intelligence
Use of DSS moved from specialist to managers, and then

whomever, whenever, wherever.

Enabling tools like OLAP, data warehousing, data mining,

intelligent systems, delivered via Web technology have

collectively led to the term “business intelligence” (BI) and
“business analytics”.
Business Intelligence (BI)
 BI refers to application and
technology, which is used to
gather, provide access to, and
analyze data and information
about the company operations.
BI helps transform data, to

information (and knowledge),

to decisions and finally to action
Knowledge Value Chain:
B.I. is a set of concepts, methods and processes to improve

business decisions using information from multiple sources

and applying experience and assumptions to develop an
accurate understanding of business dynamics.
It is the gathering, management and analysis of data to

produce information that is distributed to people throughout

the organization to improve strategic ,tactical and operational
decisions.
 Why BI?
The Five Questions

• What happened?
Past
• What is happening?
• Why did it happen?
• What will happen? Present
• What do I want to happen?
Future

Data
ERP CRM SCM Web
Data
What BI can do?
Cubes

Source
Systems/OLTP

Clients
Analysis
Data Services
Warehouse Query Tools
Reporting
Analysis

1 2 3 4
Design the Populate Create Query
Data Warehouse Data Warehouse OLAP Cubes Data
A Brief History of BI
The term BI was coined by the Gartner Group in the

mid-1990s
However, the concept is much older
1970s - MIS reporting - static/periodic reports

1980s - Executive Information Systems (EIS)

1990s - OLAP, dynamic, multidimensional, ad-hoc reporting

-> coining of the term “BI”

 2005+ Inclusion of AI and Data/Text Mining capabilities;

Web-based Portals/Dashboards
Evolution from Static Report to BI…
The Evolution of BI Capabilities
A High-Level Architecture of BI
The Architecture of BI
A BI system has four major components.
a data warehouse, with its source data

business analytics, a collection of tools for manipulating,

mining, and analyzing the data in the data warehouse;

business performance management (BPM) for monitoring

and analyzing performance

a user interface (e.g., dashboard)
The Benefits of BI
Benefits of Business Intelligence:

1. Lowering Costs.

2. Increasing Revenues.

3. Improving Customer Satisfaction.

The process of quantifying BI Benefits:
BI benefits can be categorized into 4:

1. Quantifiable benefits:
 Include working time saved in producing reports, selling information
to suppliers etc.

2. Indirectly quantifiable benefits:

 These can be evaluated through indirect evidence i.e. improved
customer service means new business from the same customer etc.
3. Unpredictable benefits:
 These are the result of discoveries made by creative users.

4. Intangible benefits:
 Intangible benefits include improved communication through
enterprise, improved job satisfaction of users and improved knowledge
sharing.
 The DSS–BI Connection
First, their architectures are very similar because BI evolved

from DSS
Second, DSS directly support specific decision making, while

BI provides accurate and timely information, and indirectly

support decision making
Third, BI has an executive and strategy orientation, especially

in its BPM and dashboard components, while DSS, in contrast,

is oriented toward analysts
The DSS–BI Connection – cont.
Fourth, most BI systems are constructed with commercially

available tools and components, while DSS is often built from

scratch
Fifth, DSS methodologies and even some tools were developed

mostly in the academic world, while BI methodologies and

tools were developed mostly by software companies
Sixth, many of the tools that BI uses are also considered DSS

tools (e.g., data mining and predictive analysis are core tools in
both)
The DSS–BI Connection – cont.
Although some people equate DSS with BI, these systems are

not, at present, the same

some people believe that DSS is a part of BI—one of its analytical tools

others think that BI is a special case of DSS that deals mostly with

reporting, communication, and collaboration (a form of data-oriented

DSS)
BI is a result of a continuous revolution and, as such, DSS is one of BI's

original elements
In this book, we separate DSS from BI

MSS = BI and/or DSS

Major Tool Categories for MSS
TOOL CATEGORY TOOLS AND THEIR ACRONYMS
Data management Databases and database management system (DBMS)
Extraction, transformation, and load (ETL) systems
Data warehouses (DW), real-time DW, and data marts
Reporting status tracking Online analytical processing (OLAP)
Executive information systems (EIS)
Visualization Geographical information systems (GIS)
Dashboards, Information portals
Multidimensional presentations
Business analytics Optimization, Web analytics
Data mining, Web mining, and text mining
Strategy and performance Business performance management (BPM)/
management Corporate performance management (CPM)
Business activity management (BAM)
Dashboards and Scorecards
Major Tool Categories for MSS
Dashboards and Scorecards
Communication and Group decision support systems (GDSS)
collaboration Group support systems (GSS)
Collaborative information portals and systems
Social networking Web 2.0, Expert locating systems
Knowledge management Knowledge management systems (KMS)
Intelligent systems Expert systems (ES)
Artificial neural networks (ANN)
Fuzzy logic, Genetic algorithms, Intelligent agents
Enterprise systems Enterprise resource planning (ERP),
Customer Relationship Management (CRM), and
Supply-Chain Management (SCM)